ANKARA/ISTANBUL (Reuters) - A U.S. decision to continue funding the Syrian Kurdish YPG militia will affect Turkey’s future moves, President Tayyip Erdogan said on Tuesday ahead of a visit this week by Secretary of State Rex Tillerson.

U.S. officials have said that Tillerson expects to have difficult conversations when he visits Turkey on Thursday and Friday, given that the NATO allies have starkly diverging interests in Syria. State Department spokeswoman Heather Nauert said Tillerson’s trip showed “just how serious this matter is.”

“This is one of the areas of deep, deep concern on the part of the administration and the U.S. government,” she told a briefing on Tuesday. “We certainly don’t want to see ... violence further escalate.”

Turkey has been enraged by U.S. support for the YPG, which Ankara sees as a terrorist organisation and an extension of the outlawed Kurdistan Workers Party (PKK) that has been waging an insurgency on Turkish soil for over 30 years. Washington has backed the YPG in the fight against Islamic State in Syria.

“Our ally’s decision to give financial support to the YPG ... will surely affect the decisions we will take,” Erdogan said in a speech to members of his AK Party in parliament.

His comments followed the release of the U.S. Defense Department’s 2019 budget, which includes requests for funds to train and equip local forces in the campaign against Islamic State militants in Syria.

The Pentagon requested $300 million for Syrian “train and equip activities” and $250 million for border security requirements, according to a copy of the budget. While it did not specify how much of this, if any, was earmarked for YPG-led forces, Turkish media interpreted it to mean that the Pentagon had allocated $550 million to the YPG in 2019.

“It will be better for them not to stand with the terrorists they support today. I am calling on the people of the United States - this money is coming out of the budget of the United States, it is coming out of people’s pockets,” Erdogan said.

OPERATION OLIVE BRANCH

Turkey last month launched a military incursion, dubbed “Operation Olive Branch”, into the Kurdish-held Afrin region of Syria to sweep the YPG away from its southern border. It has also threatened to press on to the Syrian town of Manbij, under the control of a YPG-led force, and warned U.S. troops stationed there not to get in the way.

U.S. Defense Secretary Jim Mattis said his Turkish counterpart Nurettin Canikli had attended a meeting in Rome on Tuesday to discuss strategy against Islamic State.

“On Afrin, we all spoke with the Turkish minister of defence today. He laid out the rationale, we laid out the rationale for working this to a solution that took into account Turkey’s legitimate security concerns and we’ll still work it,” Mattis told reporters travelling with him to Brussels.

He said he would meet with his Turkish counterpart later this week during a NATO gathering.

Washington says it has no plans to withdraw its soldiers from Manbij and two U.S. commanders visited the town last week to reinforce that message.

“It is very clear that those who say ‘we will respond aggressively if you hit us’ have never experienced an Ottoman slap,” Erdogan said in parliament.

That was an apparent reference to comments made by U.S. Lieutenant General Paul Funk during a visit to Manbij.

Additional reporting by Ezgi Erkoyun, Idrees Ali and David Alexander; writing by David Dolan; editing by Dominic Evans and Mark Heinrich